Purchasing a home with other borrowers can make it easier to qualify for a mortgage and get you better loan terms. Research from the Journal of Housing Economics suggests that it’s because loans with co-borrowers have lower default rates than loans with just one borrower.
But how many people can be co-borrowers on one loan, and how can multiple people go in on a house? It depends on the type of mortgage you choose.
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How Many People Can Be on a Home Loan?
Most lenders limit the number of co-borrowers on a mortgage. A co-borrower is someone who applies for a loan with at least one other borrower and shares equal responsibility for repaying the debt. This is different from being a co-signer — a person who promises to take responsibility if the primary borrower fails to pay but has no ownership in the property. Co-signers must also be underwritten, and they count toward the maximum number of borrowers.
Here are the co-borrower caps for each major type of loan.
Maximum Borrowers for Conforming Conventional Loans
Conforming conventional loans are mortgages that conform to guidelines established by government-sponsored enterprises Fannie Mae and Freddie Mac. Fannie and Freddie do not limit the number of co-borrowers to get a mortgage. However, most lenders that offer conforming conventional loans limit the number of co-borrowers to four or five.
“The more people listed on the mortgage, the more complex the approval process becomes, as there are more points of potential disqualification,” says Evan Luchaco, a home loan specialist with Churchill Mortgage.
Also note that the automated systems lenders use for processing applications limit the number of borrowers. “Today, Fannie Mae’s Desktop Underwriter system allows up to four borrowers, while Freddie Mac’s Loan Product Advisor system accepts up to five borrowers,” says Reed Letson, mortgage broker and owner of Elevation Mortgage.
Maximum Borrowers for Nonconforming Conventional Loans
Conventional home loans that don’t adhere to Freddie Mac or Fannie Mae’s guidelines are often called nonconforming, nonqualified or portfolio loans. These mortgages are underwritten according to guidelines set by the lender and either kept in a bank portfolio or sold to private investors.
“These loans are often flexible because the lender sets their own guidelines. Some lenders of these loans will allow more than four co-borrowers if they manually underwrite the loan, or if they are willing to hold onto the loan themselves instead of selling it to investors,” says Steven Kibbel, a certified financial planner and CEO of Kibbel Financial Planning. “In this case, you would need to ask the lender up front if they are open to manually underwriting it or if they can work outside the typical box.”
Kibbel notes that smaller banks or credit unions are sometimes more willing to green-light these kinds of applications than larger institutions.
Maximum Borrowers for FHA Mortgages
An FHA loan, which can be had with just 3.5% down, allows up to four borrowers on the loan. While FHA home loans are reserved for buyers of primary residences, the FHA does allow nonoccupying co-borrowers.
“This aligns with the FHA’s mission to serve (buyers of) primary residences while maintaining manageable risk assessment,” Letson says.
Maximum Borrowers for VA Home Loans
The VA home loan, which requires no down payment and is available to eligible service members, veterans and their households, permits up to four borrowers.
“However, in practice, most cases of VA loans usually only involve two persons: one veteran and a spouse,” says Alexei Morgado, a Realtor and founder of Lexawise, a real estate exam preparation course. “Adding additional persons to a VA loan can complicate factors, particularly in regards to occupancy and entitlement computation.”
There are circumstances in which the VA allows a manually underwritten loan with a nonmilitary co-borrower who is also not the primary borrower’s spouse. This is called a joint VA home loan, and these loans must get special prior approval from the VA.
Maximum Borrowers for USDA Home Loans
USDA loans also require no down payment, although you must agree to purchase a home in an approved rural setting. Technically, there are no limits on the number of co-borrowers allowed for a USDA loan, but each co-borrower must live in the home as their primary residence. In addition, the USDA’s automated Guaranteed Underwriting System, or GUS, allows a maximum of four co-borrowers.
[See: Best Low- and No-Down-Payment Mortgages]
How Can Multiple People Go in on a House?
Eager to purchase a home but need a co-borrower team to share the financing burden? Here’s what to anticipate and how to plan for this process.
What You Should Expect with Multiple Borrowers
Having multiple co-borrowers can improve your chances of getting approved if your combined income and assets strengthen your application.
“However, lenders will evaluate each borrower’s credit profile, income and debt independently,” says Letson, adding that if one borrower has credit or financial red flags, it could jeopardize the entire application. “The lowest credit score among co-borrowers often becomes the determining factor for loan terms. Additionally, all borrowers must provide complete financial documentation, which can extend the processing timeline.”
It’s also crucial to ensure that every co-borrower is on the same page when it comes to a long-term commitment to the loan and their obligations to repay the debt.
Luchaco points out that if any co-borrowers want to pursue another home in the future, they are still responsible for the mortgage they already have. The co-borrowed mortgage remains on their credit report and may make future borrowing more difficult.
Applying for a Home Loan With Multiple Borrowers
The process of applying for a loan when multiple co-borrowers are in the mix is similar to what’s involved with a single borrower. Here are the typical steps:
1. Compare mortgage quotes from several different lenders and choose one. If you plan to have more than four or five co-borrowers, ask lenders up front if they’ll allow it.
2. Complete a joint mortgage application (typically via an online portal, but you can also do it in person or by phone).
3. Submit documentation for all co-borrowers. If you apply online, you can upload it directly into the portal.
4. Have each co-borrower sign disclosures and authorize credit pulls.
5. Await an underwriting decision.
6. Respond to underwriter requests for additional documents or information as soon as possible.
7. Once you’re preapproved, you can shop for a home. Forward your accepted offer to your lender.
8. The lender orders a home appraisal, evaluates the property and (hopefully) clears you to close.
Each co-borrower signs the loan documents, the loan closes and funds, and the property changes hands.
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How Borrowers Should Prepare
When you have several applicants on a mortgage application, each one has to meet the lender’s guidelines. All co-borrowers have homework to do before applying:
Check and Improve Your Credit Score
With credit scores on a mortgage application, higher is always better. For most loan programs, better credit equals lower interest rates and easier qualifying. Here are the minimum qualifying credit scores for several popular mortgage programs:
Which Credit Score Do Lenders Use With Multiple Borrowers?
Fannie Mae recently updated its guidelines for determining the representative credit score for multiple borrowers. The representative, or qualifying, credit score is used to determine if the applicants meet the lender’s guidelines and to price the loan. Previously, lenders would use the lowest of all median scores when multiple borrowers applied together. Now, however, they take the average of the median credit scores of all applicants to determine the final score for the loan.
“For example, if borrower A has a median score of 740, and borrower B has a median score of 680, the representative score would be 710, not 680,” Letson says. “Right now, Freddie Mac does not use this method; instead, they use the lower of the median scores for multiple borrowers.”
This is a helpful change for consumers whose scores don’t quite meet the minimum. If one or more co-borrowers have a low credit score, though, you’ll have to go with a lender that embraces this standard — like a Fannie Mae lender.
Review Your Credit Reports
You can check your three credit reports for free. If you spot any inaccuracies, errors or indications of fraud/identity theft, contact each of the three credit bureaus and have your reports corrected.
Calculate Your Debt-To-Income Ratio
Likewise, each co-borrower will need to ensure that their DTI ratio — the percentage of monthly income that goes toward debt payments — doesn’t exceed the program’s threshold. Here are the typical limits:
Gather Needed Documents
Each co-borrower should collect important paperwork needed, including:
— Two years of W-2s and tax returns
— Recent pay stubs (from the last 30 days)
— Two months of bank statements
— Employment verification
— A valid ID and Social Security number
“All (employed) borrowers will need to show at least their last two years of work history, ideally with no more than three jobs in that period, and of employment more than 60 days,” says Luchaco.
Get Preapproved
Martin Boonzaayer, CEO of real estate investment firm The Trusted Home Buyer, advises co-borrowers to at least prequalify for a mortgage before shopping for a home. And it’s even better, Boonzaayer says, to apply for mortgage preapproval. This can be especially helpful for applications with multiple co-borrowers because extra borrowers can mean more opportunities for things to go wrong.
“Preapproval is more thorough and gives you a clearer idea of how much you can borrow. It also shows sellers you are serious about buying, which can help in competitive markets,” Boonzaayer says.
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